Chobani Yogurt: Healthy Products Nourishing Growth

Fall 2010 - Hamdi Ulukaya grew up in eastern Turkey, where his family was in the farming and dairy manufacturing business. In 1994 he came to the United States as a student, and following graduation he put a lifetime growing up in the industry into opening his first cheese plant. Organizing his brands under the Agro Farma Inc. umbrella, Ulukaya established his feta cheese producer, Euphrates, in 2002, and then followed up its success in 2007 when he launched Chobani, realizing his dream of offering a high-quality, authentic Greek yogurt to the American market.

Acting as president and CEO of Agro Farma, Ulukaya began the process of introducing Chobani in 2005, when he purchased an old dairy farm in upstate New York that was being vacated. “It seemed crazy, having this huge corporation that was deciding to get out of a challenging [food manufacturing] category, and here was a smaller group like us jumping right in. It didn't make a lot of sense to some people, but we always believed in good yogurt, not the yogurt that was out there,” Ulukaya explains. “So, Chobani began in that old plant. We started with five employees from the leaving company and grew that to 300 people as Chobani became a leading brand in the Northeast.

“We only have this plant for now, but we’ve invested $70 million in keeping it technically advanced since we bought it. The plant is nearing capacity, but we look at our business and how it’s going, and we think the plant still has a lot of potential production capability we can harness through efficiency before we're forced to move to a second place,” Ulukaya shares.

Keeping it Simple

Ulukaya attributes much of the success introducing authentic Mediterranean tastes to simple, healthy ingredients, and word-of-mouth. “The benefits of yogurt have been known for years and years. But the way it was introduced [in America] it was filled with sugar, additives and colors, and became a fast food-type thing instead being a natural, good food. When something like [Chobani] becomes available, people who never liked yogurt can have this,” Ulukaya says. “If something nice hits the marketer, it catches on so fast. So telling friends and family becomes your biggest marketing tool, that’s how it spreads.

“In many cases it’s not easy for a start-up company to have a chance in this major competition world,” Ulukaya continues. “You can have a healthy, good-for-you product, but it has to taste good. So it has been key for Chobani that is it fat free, but tastes creamy, and people spread the word about this great find.”

Thanks to the vast appreciation for the company's small, delicious indulgences, Chobani has been able to be profitable, and the company’s main challenge has been far preferable to that experienced by many companies struggling in unstable economic times. “I know its been challenging for a lot of people out there, a lot of communities, a lot of businesses, but on our side, at the end of 2007, we had been growing and had jobs through investing in the plant nonstop,” Ulukaya says. “Our challenge is not related to the whole economic crisis, but it's been keeping up with the demand and preparing for the future. But we’ve done very well on that side.”

Another part of the company’s success is no doubt a result of its interactions with consumers. Nicki Briggs, a registered dietitian and head of the company's communications team, explains, “We’re on all the major social media platforms. The growth of Chobani really started virally, where one person would try it, tell five friends who each told five friends, and it really became a brand people loved to discover on their own and tell other people about. In the online landscape, we just had really great success at being able to talk to our fans. I think one of the great things about our company is our relationship with consumers; it’s really a lot of fun to hear what they have to say and take it to heart.”

Ulukaya supplements Briggs’ assessment, saying, “It’s been our focus from day one to make sure our communications are honest and simple. On our website the consumers’ remarks about our products are live, whether it's good, bad or whatever.”

Chobani's customer interaction extends beyond the virtual world. To support its consumers, Chobani has returned 10 percent of its profit to the community each year. “It started locally, but grew to a bunch of communities and causes we support. We are very actively involved; we are very serious about it because everything helps, that’s what we believe,” Ulukaya shares.

Briggs adds, “Giving back this 10 percent began with the company’s beginnings, and it takes a lot of guts as a young start-up, not really having anything to give, let alone 10 percent of profits. So, as we’ve grown we’ve watched that amount increase along with the amount of people we help.”

Managing Growing Success

To ensure these annual donations can continue, Chobani is diversifying its products through a new youth-oriented line called Chobani Champions. “We are very excited about our new line; we tested the market for a couple months and we're very serious about Chobani Champions. It’s simply the best yogurt designed for kids – nothing more or less than the regular line, but it’s just blended and more functional for kids,” Ulukaya shares. “Hopefully the parents that are complaining that everything out there for kids are filled with sugars and colors and stuff will have an alternative with this. They’re nice tasting, but also fun for the kids, while made with real fruit, nothing artificial.”

For the ingredients in Chobani Champions and all of the brand’s other products, the company looks to local milk suppliers for the best quality. Managing the supply chain has always been an important part of Chobani’s success. “You have to make sure you’re buying the right stuff at the right time and make sure you give enough time to your suppliers. We’ve done well with that one, but it’s challenging every day,” Ulukaya explains.

When choosing suppliers, the company looks for quality first, customer service second, and price third. “So a company that has these three together has got our business. Of course, we want to remain local, but that comes after those first three,” Ulukaya shares. “We are very picky on who we pick to work with, and once we select we tend to work with them for a long time, because they know us and we know them. But, as we grow, sometimes one supplier is not enough, so we have to get a second supplier.”

All aspects of the business require management, and Ulukaya constantly works to improve his product blends and mechanical production. “We do go back to our plant to automize or increase capacity, and one of the best things we are working on is we are investing in our system in ways that will turn the waste into energy that will run the plant,” Ulukaya divulges. “Our byproducts have so much energy, and by the time we finish this $20 million investment we will be completely free from outside energy sources. We will be using heat, steam and electric for the warehouse, and giving energy back to the grid. That is one thing I am so excited about.”

While these technological advancements add to a long line of exciting projects, Ulukaya says his favorite part of the business is the people with whom he works. “Imagine you have a plant that closed and everyone is thinking the plant is no good or the people are no good or the area is no good, and you go back to prove them wrong and hire the same people and turn things around completely. Working with those people every day in and out has been the best experience,” he shares. “We are where we are today because of people. Anybody can make a good yogurt, but to make it good every day and to grow to be the number one brand in less than two years, that’s nothing but people, and good people.”

Ulukaya hopes to continue the growth, and working with even more people. To do so, he uses several indicators to maintain the company’s success. “Everyday, before I do anything, I eat a cup of our yogurt to see how it tastes. Next I look at our production numbers. Third is checking on our distribution levels. Business is simple, if you look into it and make sure the core things are working,” Ulukaya advises.

Using these indicators as guides that it's time to grow, Ulukaya has several short-term goals. “By the end of 2011 I want to be the number one brand in the Northeast, and not only in Greek yogurt, but all yogurt. By 2013, I would like to be number one in the whole country,” he shares. “And this 90-year-old plant that we turned around is busier than ever in the last 100 years. It tells me the American spirit is alive. In the future we see multiple locations. We want to be a lot larger in size and stay small in philosophy. And I don’t think it will take us long to get there, where we even expand beyond yogurt.”

Having realized one man's dream, revitalized a town and introduced an impeccable, healthy product to the market, Chobani Yogurt has established what it takes to continue growing, continually producing what its motto promises: nothing but good.